Sirius XM Radio increases full-year free cash flow guidance again

By Lisa Kerner

Charlotte, N.C., Aug. 2 - Sirius XM Radio Inc. increased its free cash flow projection for full-year 2011 for the second time after second-quarter free cash flow improved by 53% compared to the prior-year period, Mel Karmazin, Sirius' chief executive officer, said Tuesday during the company's quarterly earnings conference call.

Free cash flow in the second quarter was $165 million, driven by cash received from the merger of Sirius Canada and XM Canada in June, a decline in satellite capital expenditures and improved adjusted EBITDA.

"After a strong first half, we now expect free cash flow in 2011 will approach $400 million, up from our prior guidance of approaching $350 million," Karmazin said.

At the end of the second quarter, Sirius had $528 million of cash and cash equivalents. The company used about $75 million to repurchase debt in the second quarter.

Karmazin said the company expects to end the year with a cash balance of about $750 million. With no debt to pay off in 2012, Sirius should be able to return cash to shareholders, he said.

The first use of excess cash would be accretive acquisitions, followed by shrinking the number of outstanding shares, Karmazin said.

Sirius is closing in on its leverage target goal of a net debt-to-adjusted EBITDA ratio of about 3 times. The ratio declined to 3.7 times at the end of the second quarter from 5.2 times at the end of the second quarter of 2010.

Adjusted EBITDA up 20%

Sirius reported record second-quarter revenue and adjusted EBITDA results despite a weak economy and a competitive market, according to Karmazin.

Revenue was $744 million, up 6% over second-quarter 2010 revenue of $700 million. The growth was driven by an 8% increase in subscribers during the quarter.

Second-quarter adjusted EBITDA was $185 million, up 20% from $154 million in the second quarter of 2010.

The company reported second-quarter net income of $173 million, compared with net income of $15 million in the second quarter of 2010.

Sirius XM is a satellite radio provider based in New York.

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